Market trends provide opportunitiesPaints and coatings are used for a variety of applications, including the protection and decoration of structures, buildings and different kinds of products. Painted surfaces have good resistance to climatic stress and can also have special features, such as fire retardation. Paints also have a positive impact on the built environment by decorating homes, offices and production facilities as well as in enlivening urban areas.
The main factors and market trends affecting the demand of paints and coatings are:
- general economic development (GDP)
- activity on construction and renovation markets
- home sales activity level
- employment situation and consumer confidence
- improving standard of living and rise of middle class
- increasing environmental awareness
- importance of home interior decoration and refurbishing
- industrial activity level (industrial coatings)
Increasing paint consumption per capita
The paint market structure and consumption patterns vary between geographical areas. The growth in paint consumption has historically correlated with an increase in the standard of living. The market in Western Europe is relatively mature and sales will increase moderately. In Central Eastern Europe as well as in the CIS countries, the current decorative paint consumption per capita is significantly lower than in Western Europe. The consumption is expected to pick up in Central Eastern Europe and the CIS area as the standard of living increases.
General economic development
The global economic recession in the past years particularly affected e.g. Western Europe; however, recovery is expected over the next few years. In terms of Russia, the oil price has a considerable effect on general economic development and purchasing power.
Construction and renovation
The construction and renovation of buildings and structures is an important end-use of paints and coatings. During slower new construction periods, renovation activities have often picked up. The recession seen in the past years clearly decreased the activity of new construction, particularly in Europe and the United States. The share of new construction in decorative paints’ overall demand is approximately 20–25 percent. For Tikkurila, renovation construction also plays a larger role than new construction. In the future, construction is expected to grow most in emerging markets, such as Russia and its neighboring areas.
Increasing demand for premium and medium products
The paints produced and sold in Western Europe are almost exclusively medium or premium products. Economy products have traditionally been popular in Russia, other CIS countries and Central Eastern Europe. The preferences regarding the quality of paint will change towards medium and premium products in the long-term as the standard of living improves in the emerging economies.
Increasing interest towards home decoration
Consumer interest towards home decoration has increased. In the Nordic countries in particular, home product and interior design markets have grown in the past years, although the recession was also visible in the interior design markets. The importance of quality is also emphasized in home decoration materials and products. Tikkurila’s strong focus on beautifying the home and its surroundings is for instance visible through active participation in trade fairs and other events.
The regulation of paint production, product safety, handling and marketing of paints and coatings is increasing as a result of the implementation of new safety and environmental rules. One major legislative change that affects the manufacturing and sale of paints and coatings is the REACH regulation (the EU regulation concerning the registration, evaluation, authorization and restriction of chemicals), which obligates chemical manufacturers and importers to assess the risks related to product use and provide end-users with instructions on how to use them safely. Paints themselves are not substances referred to in the regulation, but paint manufacturers must ensure that all substances used in their paints meet REACH requirements. The REACH regulation may decrease the number of paint manufacturers in Europe and reduce the importing of paints and raw materials to the EU.
Other important legislation projects related to paints involve for instance the amount of emissions of organic solvents into the air.
Environmental awareness among consumers
In addition to the regulation regarding content and safety of paints, the environmental awareness of end-users in relation to both products and their packaging has increased. The share of water-borne paints is approximately 85 percent of the world’s decorative paint volume, and the share is estimated to grow in the future, particularly in emerging countries, most likely, however, at a moderate rate.
Megatrends impacts on Tikkurila's operations
We live in a world of constant change. The requirements of our operational environment are becoming increasingly demanding in many respects – tighter legislation and authority requirements, changing customer needs and buying behavior, and global and business environment trends have a considerable impact on our business. In developing our operations and products, we take into account the world around us and people’s needs.
Trends affecting our business include urbanization, rise of the middle class, changes in consumption behavior and digitalization as well as climate change, among other things. As we develop new products, services, and concepts, we carefully analyze the risks and opportunities of different trends and act accordingly.
4 megatrends that drive our business
Climate change affecting the whole globe
Changing weather conditions and temperatures, increasing air pollution and indoor air problems, different health risks.
Share of middle class is growing
Increases in economic income and consumption, changing consumption patterns, increasing demand for premium brands, health and well-being related products and services.
By 2050, more than 65% of world's population lives in urban areas
Improved economic well-being, social development, increasing building construction, increased energy consumption and emissions.
Comprehensive way to connect with customers and understand their needs in detail through data, optimize operations and develop new growth opportunities.
Middle class is growing in many countries, and they want to invest in well-being, health, and the decoration of their homes. Urbanization has been seen to increase new construction. This results in a growing need for raw materials and chemicals, as well increased energy consumption. In recent years, Tikkurila has invested in functional products that help our customers operate in a more energy-efficient manner, among others. Air pollution and indoor air problems have also increased, and we believe that there will be a growing demand for low-emission and high-quality products that are safe for the environment and for health, as well as for entirely new kinds of surface treatment solutions. Digitalization will open up entirely new opportunities for the paint business.
Climate change will cause many changes in society and ecosystem services. From the perspective of Tikkurila’s business, the risks include increasingly extreme weather phenomena and tighter legislation concerning raw materials, the composition of our products, and our operations. The conditions to use our products will also change. Climate change sets stricter requirements for the surface treatment of different materials. Paints and coatings need to be increasingly durable in ever-changing climate conditions ranging from humidity to freezing cold and scorching heat. We take climate issues into account in our risk assessments, and strive to increasingly evaluate their effects from our products’ and customers’ perspectives.
In our own operations, we invest in resource efficiency, environmental safety of our processes, and environmental protection, and assess how we can promote the circular economy through our operations. As the natural resources essential to our business become scarcer, we must improve the efficiency of our production and use of resources, as well as find new and renewable raw materials.